The European Commission (EC) is close to forcing Microsoft to bundle rivals' browsers with Windows, confirming that it plans to severely punish the company for what regulators say has been a decade's worth of illegal activity that unfairly hurt competitors, sources close to the case say.

At the same time, Google is joining other makers of competing Web browsers in calling the market "largely uncompetitive" due to Internet Explorer (IE)'s close ties to Windows.

The news marks the strongest signs yet that Microsoft (NASDAQ: MSFT)'s ability to bundle IE with Windows may soon become a thing of the past. The software giant itself suggested such a possibility last month.

Now, it's looking more like a certainty.

The EC -- the executive branch of the European Union (EU) -- is awaiting a Microsoft response and hearing request, and has yet to issue a final ruling on the matter. But Neelie Kroes, the EC's competition commissioner, will likely push for non-Microsoft browsers being included alongside IE in European versions of Windows.

That's according to comments made by Jonathan Todd, a spokesperson for Kroes. Todd was unavailable for comment, but another EC spokesperson confirmed statements to InternetNews.com that Todd had made to European news site EurActiv.

Todd told EurActiv that if the EC confirms that Microsoft since 1996 has illegally blocked rivals by tying IE to Windows, "the Commission would intend to impose remedies that enabled users and manufacturers to make an unbiased choice between Internet Explorer and competing third-party Web browsers."

EC spokespeople would not speculate further on the implications, however. "The Commission cannot at this stage of the procedure disclose more details about the envisaged remedy, should one be appropriate," a spokesperson said in an e-mail to InternetNews.com.

The showdown between Microsoft and the EC marks the latest in a years-long conflict with the EC on antitrust issues. It also comes at a time that the company is trying to shed as many legal distractions as possible in the run-up to the launch of Windows 7 this summer.

In a statement of objections delivered to Microsoft last month, the EC laid out an argument that claimed the "tying of Internet Explorer to the Windows operating system harms competition between Web browsers, undermines product innovation and ultimately reduces consumer choice," according to an EC statement at the time.

The argument is simple. Microsoft hasn't been found culpable of anything yet, although from the tone of Todd's statements, it sounds as if the EC is on its way toward drawing that conclusion.

Still, EU spokespeople said that the decision has yet to be finalized.

"The investigation is still ongoing, and sending a statement of objections does not prejudge the final outcome of the procedure," the spokesperson said.

For one thing, Microsoft still has about three to five weeks to respond in writing and to ask for a hearing. A Microsoft spokesperson declined to comment but pointed to a statement it released last month, indicating that the company would cooperate with the EC.

"We are committed to conducting our business in full compliance with European law," the statement said. "The statement of objections expresses the Commission's preliminary view."

Signs point to punishment

However, it's not as if no one saw such a penalty coming.

Microsoft warned stockholders in its latest 10-Q filing last month that it expected the EC's competition directorate to force it to bundle rivals' browsers into Windows.

Additionally, Microsoft is likely to be hit with perhaps the largest fine it has yet been charged in its dealings with European antitrust watchdogs. In 2004, EC regulators ordered it to pay nearly a billion dollars in fines. It lost its appeal in 2007, and is currently appealing a roughly $1.35 billion additional fine for being slow to settle aspects of that case.

Microsoft's 10-Q warns stockholders that the fine in the latest case could be "significant."

The likelihood that the EC will come down on the plaintiff's side in this latest case against Microsoft grew last spring when Kroes gave a speech to a European open source group in which she complained that antitrust sanctions had not been effective in remedying a certain, unnamed company's dominance. Other statements she made, at the time, however, made it very clear she was referring to Microsoft.

Page 2: Not making the same mistake twice?

Go to page: 1  2  Next